N7055
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO.454 OF 2003

BETWEEN:
DAVID GUINN trading as GUINN PKF CHARTERED ACCOUNTANTS
Plaintiff

AND:
THOMAS SEROWA   
Defendant

Waigani  :  David, J
2017  :  31 October

PRACTICE AND PROCEDURE – on an application to set aside an order entered ex-parte, an applicant must; provide an explanation why the order was allowed to be made in his absence; if there is any delay in making the application to set aside, provide a reasonable explanation as to the delay; demonstrate by an affidavit that he has a defence on the merits or an arguable case - National Court Rules, Order 12 Rule 8.

Cases Cited:

Barker v The Government of Papua New Guinea (1976) PNGLR 340
Christopher Smith v Ruma Constructions Ltd (2002) SC695
George Page Pty Ltd v Balakau [1982] PNGLR 140
Green & Co. Pty Ltd v Green [1976] PNGLR 73
Island Helicopter Services Ltd trading as Islands Nationair v Wilson Sagati & Ors (2008) PGNC 49; N3340
Leo Duque v Avia Andrew Paru (1997) PNGLR 378
Leo Hannet v ANZ Banking Group (PNG) Ltd (1996) SC505
Motor Vehicles Insurance (PNG) Trust v Joseph Bure (1999) SC613
Rex Paki v Motor Vehicles Insurance Limited (2010) PGSC 2; SC1015
The Government of PNG & Davis v Barker [1977] PNGLR 386

Counsel:

Philip Wright, for the Plaintiff
Thomas Serowa, Defendant in person

RULING
31st October, 2017

1.      DAVID, J:  INTRODUCTION: This is a ruling on two applications, one each filed by the parties which were heard together.

2.      The plaintiff’s application was moved pursuant to a notice of motion filed on 5 October 2010 seeking the following orders:

“1.	An order pursuant to Order 12 Rule 8 setting aside the Court Orders dated 24 August 2010.
2.	An order pursuant to Order 12 Rule 8 that the proceedings registered as WS No.454 of 2003 be reinstated. 
1.	An order that the Defendant pay the Plaintiff’s costs of an incidental to this application.
2.	An order that these proceedings be returned to the Waigani Registry.
3.	Such other or further orders as this Honourable Court deems just.
4.	The time for the entry of these orders be abridged to the time of settlement.”

3.	The defendant strongly contested the application.  He filed a Notice of Cross-Motion on 27 October 2010 challenging the plaintiff’s application and they seek the following relief:

“1.	Pursuant to Order 12 Rule 40 of the National Court Rules, the Notice of Motion filed by the Plaintiff on 05/10/2010 be struck out on the grounds for filing a misconceived application, which is equal to a frivolous action, an abuse of the Court process and showing no reasonable cause of action.
2.	 Alternatively, pursuant to Sections 211(1) and (2) and 214(3) of the Constitution, Section 113(5) & (8) of the Organic Law on Provincial Governments, Section 16 of the Audit Act and Section 7(b) of the Defamation Act, the Notice of Motion filed by the Plaintiff on 05/10/2010 be struck out on grounds for want of locus standi to the entire proceedings where the Plaintiff lacks sufficient interest in the matters for the State authorities for Reports produced by imposing Public Policy Accounting & Auditing Compliance Legislation.  
3.	Cost of the applications and the entire proceedings shall be paid by the Plaintiff on Solicitor Client basis or on full indemnity basis for continuously filing misconceived applications, for showing no reasonable cause of action, for frivolity or vexation, for malicious prosecution, for harassment and for abuse of the court process.” (sic) 

4.	The plaintiff relied on the following affidavits of:

(a)	David Guinn sworn on 1 October 2010 and filed on 5 October 2010 (first affidavit);
(b)	David Guinn sworn and filed on 4 November 2010 and filed on 5 November 2010 (second affidavit);
(c)	David Guinn sworn and filed on 16 November 2010 (third affidavit).

5.	In contesting the application, the defendant relied on the following materials:

(a)	Affidavit of Thomas Serowa sworn on 7 September 2010 and filed on 8 September 2010 (first affidavit);
(b)	Affidavit of Thomas Serowa sworn and filed on 29 October 2010 (second affidavit);
(c)	Affidavit of Thomas Serowa sworn on 21 March 2011 and filed on 22 March 2011 (third affidavit);
(d)	List of Documents on Extract Argument on Cross-Motion in Reply Submission filed on 23 March 2011. 

6.	The List of Documents on Extract Argument on Cross-Motion in Reply Submission is a compilation of copies of Court documents and they include; the order of 24 August 2010, applicant’s notice of motion, respondent’s notice of cross-motion, affidavits relied on by the parties and the transcript of proceedings conducted on 24 August 2010.  The applicant did not take issue with the respondent relying on the document.

7.	In prosecuting their respective motions, the parties relied on written submissions and amplified them with their oral submissions.  I have considered the submissions.  I will address the issues raised in both motions together. 

BRIEF BACKGROUND
8.	By Writ of Summons endorsed with a statement of claim filed on 8 April 2003, the plaintiff commenced this action claiming damages against the defendant for defamation based on a letter written by the defendant to the plaintiff dated 8 November 2002.  The plaintiff makes these allegations.  He is the principal of a chartered accountant firm and trades under the business name of Guinn PKF.  He was formerly a director of Melpa Properties Ltd (Melpa Properties) between 1995 and 2001 and was engaged by Melpa Properties to provide accounting, taxation and secretarial services.  The Defendant is an accountant trading under the name T Serowa & Co.  The plaintiff claims that the matter published in the letter dated 8 November 2002 taken in their natural and ordinary meaning conveyed imputations which were defamatory of him and when distributed to a number of people seriously damaged his reputation and caused him considerable distress and embarrassment in that it was alleged that:

1.	He misappropriated money belonging to Melpa Properties.
2.	He conspired to defraud Melpa Properties of its money and assets.
3.	He was dishonest in his dealings with Melpa Properties.
4.	He failed to act professionally by protecting the assets of Melpa Properties.
5.	He breached the terms of his employment and duty of care under his contract of employment as a director of Melpa Properties.
6.	He dishonestly and illegally retains property belonging to Melpa Properties or alternatively has control of such properties without informing Melpa Properties of such control.

9.	On 24 August 2010, the Court dismissed the entire proceedings upon the respondent moving his notice of motion filed on 27 July 2010 ex-parte.  There was no challenge that the order was not regularly entered.

PRELIMINARY MATTER 
10.	The respondent, whilst responding to the applicant’s submissions, took issue with the applicant being represented at the hearing by Posman Kua Aisi Lawyers or the documents they had filed on behalf of the applicant on the basis that on the Court’s record, that firm ceased acting for the applicant in these proceedings when they filed a Notice of Ceasing to Act on 14 April 2009.  In addition, the respondent submitted that a search conducted by himself of the Court records on 21 March 2011 revealed that that firm had not filed any notice in Court giving notice of their reappointment as lawyers for the applicant in these proceedings and the situation remained the same as at the date of hearing.   Mr Wright of counsel for the applicant, in reply, did not seriously contest the objection or refer the Court to any notice of appearance having been filed after the filing of the Notice of Ceasing to Act.

11.	It is not disputed that Posman Kua Aisi filed a Notice of Ceasing to Act for the applicant on 14 April 2009.  This would have been in accordance with Order 2 Rule 39 of the National Court Rules and having effect in accordance with Order 2 Rule 40 of the National Court Rules.  The applicant does not seriously contest the objection and the Court’s record do not show that a notice of appearance was filed by Posman Kua Aisi Lawyers after they filed their Notice of Ceasing to Act to renew representation.  The respondent however raised this matter mid-hearing after the applicant moved his motion and when making his rebuttal submissions. He did not raise this matter in his notice of cross-motion as well.  The respondent did not refer to any provision of the National Court Rules to support his objection, but as I understand it, he seems to have relied on Order 2 Rules 37, 39 and 40 of the National Court Rules.

12.	It is however in evidence in the respondent’s second affidavit at annexure “M” that the respondent raised his concern on the issue by letter to Posman Kua Aisi Lawyers on 11 October 2010 and requested them to withdraw the applicant’s motion.  It seemed to me at the hearing that the applicant’s lawyer, Mr Wright was taken by surprise and as a result offered no real assistance in his reply.   Had the respondent raised the issue earlier on before the applicant’s motion was moved, the Court would have dealt with the issue there and then, but midway through the hearing in my view was prejudicial to the applicant and would not be in the interest of justice at that stage of the hearing to deny the applicant his day in Court.  In the circumstances, I grant leave to the applicant to move his application and reject the respondent’s objection as a result.   

LEGAL PRINCIPLES OF SETTING ASIDE JUDGMENTS/ORDERS OBTAINED EX PARTE
13.	The principles of setting aside an order obtained ex parte are now well settled in this jurisdiction:  Green & Co. Pty Ltd v Green [1976] PNGLR 73; Barker v The Government of Papua New Guinea [1976] PNGLR 340; The Government of PNG & Davis v Barker [1977] PNGLR 386; George Page Pty Ltd v Balakau [1982] PNGLR 140; Leo Hannet v ANZ Banking Group (PNG) Ltd [199] SC505; Leo Duque v Avia Andrew Paru [1997] PNGLR 378; Motor Vehicles Insurance (PNG) Trust v Joseph Bure (1999) SC613; and Christopher Smith v Ruma Constructions Ltd (2002) SC695.  The jurisdiction to do so is exercised under either Order 12 Rule 8 or Order 12 Rule 35 of the National Court Rules and the exercise of power is in the discretion of the Court.  These rules give the Court limited power to set aside its own judgments.  In this instant case, the plaintiff relies on Order 12 Rule 8.   The Court has an unfettered discretion:  Evans v Bartlam [1937] AC 473.   The principles are the same in each case.  These principles apply in applications to set aside default judgments or orders made in the absence of one of the parties in proceedings commenced by writ of summons as well as those commenced by originating summons: Motor Vehicles Insurance (PNG) Trust v Joseph Bure; Christopher Smith v Ruma Constructions Ltd. 
14.	In order to be successful, it is incumbent upon the applicant to satisfy the Court:

1.	why the judgment or order was allowed to be entered in his absence;
2.	if there is any delay in making the application to set aside,  provide a reasonable explanation as to the delay; and
3.	by affidavit stating material facts disclosing a defence on the merits. 

15.	As to the third principle, in the present case, as the order sought to be set aside by the applicant is with regard to a number of orders made in favour of the respondent in his absence and not a default judgment, the principle that ought to be considered in my view is whether the plaintiff has an arguable case.  The court must be satisfied that, prima facie, having regard to the evidence furnished by an applicant, the applicant has an arguable case. 

16.	All three considerations must be satisfied by an applicant.

APPLICATION OF LEGAL PRINCIPLES TO FACTS AND CIRCUMSTANCES OF CASE 

Why was the judgment or order allowed to be entered in the absence of the plaintiff?
Applicant’s submissions
17.	The applicant submitted that his affidavit evidence provided a reasonable explanation as to why judgment or order made against him on 24 August 2010 was made in his absence and he gives the following reasons: 

1.	At the time when the motion to dismiss the proceedings was served on him on 3 August 2010, he had not retained a lawyer and he informed the defendant of that fact and also the fact that he would be out of town from 9 August 2010. 
2.	The defendant intended to proceed with his motion despite being made aware that the applicant would be away and out of the country.
3.	Despite those circumstances, the defendant refused to accede to applying for an adjournment of the hearing of the motion.
4.	He was of the impression and belief that the date of the hearing of the defendant’s motion was on 9 August 2010.
5.	Neither he nor his office was advised by the defendant that the defendant’s motion would actually be heard on 24 August 2010 and this denied him the opportunity to be represented at the hearing either in person or by his lawyer to oppose the application. 
6.	The applicant was confused by the defendant proposing to him by his letter to him dated 2 August 2010 which was served on him on 3 August 2010 to enter consent orders to terminate the proceedings and to argue the issue of costs separately when he had not retained a lawyer to represent him at the time.
7.	A combination of factors resulted in the defendant moving his motion in the absence of the applicant or his lawyer.
8.	The applicant has a meritorious claim which is neither frivolous nor vexatious so he did not believe that the defendant would move his motion. 
9.	 It is the applicant’s desire to prosecute the proceedings and to have damages for defamation assessed against the defendant.

Respondent’s submissions  
18.	It is essentially submitted by the defendant that the applicant was well aware of the hearing of the respondent’s notice of motion filed on 27 July 2010 on 9 August 2010 having been told at the time of service of the motion and the supporting affidavit by letter dated 2 August 2010 that the motion was to terminate the proceedings and subsequent letters from him to the applicant dated 4 August 2010 informing him of the hearing rescheduled for 9 August 2010 and 6 August 2010, responding to the applicant’s letter to him of 5 August 2010 informing him, amongst other things, that he would proceed to move his application having satisfied the requirements for service of his notice of motion upon the applicant under the National Court Rules.

Reasons for ruling
19.	The respondent served his notice of motion filed on 27 July 2010 and his affidavit in support sworn on 26 July 2010 and filed on 27 July 2010 upon the applicant on 3 August 2010 at about 1:25 pm at his office in Port Moresby under cover of his letter to the applicant dated 2 August 2010:  annexures “C1”, C2 and C3” of the respondent’s second affidavit.  The notice of motion was initially made returnable on 2 August 2010 at 9:30 am.  By the letter dated 2 August 2010, the defendant gave notice to the plaintiff that the motion sought to terminate the proceedings and costs be argued separately and also furnished draft consent orders for the applicant’s consideration and endorsement if he agreed.  By his letter to the applicant dated 4 August 2010, the respondent informed the applicant that the hearing of the motion had been rescheduled to 9 August 2010 at 9:30 am:  annexure “D” of the respondent’s second affidavit.

20.	By his letter to the respondent dated 5 August 2010, the applicant; confirmed receiving the documents served by the respondent on 3 August 2010; that he would refer the documents to his lawyers; and that he would be overseas “next week”:   annexure “F” of the respondent’s second affidavit.  In that letter, the applicant stated that he was of the belief that listing of the matter for 9 August 2010 was premature and invited the respondent to contact him if he had any queries regarding the matter.   By his letter to the applicant dated 6 August 2010, the respondent informed the applicant that he would prosecute his motion at the hearing scheduled on 9 August 2010 and requested him to appear at the hearing and seek an adjournment himself if he so desired: annexure “G” of the respondent’s second affidavit.  

21.	At the time of service of the respondent’s notice of motion, the applicant did not on record have a lawyer; his lawyers, Posman Kua Aisi who had represented him since the filing of the proceedings ceased to act for him by filing a notice of ceasing to act for him on 14 April 2009:  annexure “B1” of the respondent’s second affidavit.  The applicant by his letter to the respondent dated 5 August 2010 however indicated to the respondent that he would refer the documents constituting the respondent’s application to terminate the proceedings to his lawyers.  As to whether the applicant travelled overseas as earlier indicated, there is no evidence of the reason for the trip. The applicant states that he was out of the country from 6 to 16 August 2010.  The applicant states that the respondent faxed him a letter on 6 February 2010 informing him that he had ignored his proposal, which he said was untrue, and that he intended to proceed with his motion and requested him to be present in Court on 9 August 2010. He states that he was surprised by the respondent’s attitude as he knew about his overseas travel.   

22.	Given the attitude of the respondent communicated to the applicant by his letter of 6 August 2010, there is no evidence before the Court from the applicant that he reverted to the respondent before the hearing on 9 August 2010 about his position with regard to the respondent’s motion by letter or any other means.   

23.	No issue was raised by the applicant at the hearing about any lack of notice from the respondent about an impending application to terminate the proceedings being filed prior to the filing of the respondent’s notice of motion on 5 October 2010.

24.	The respondent complied with the rules for service of notices of motion under Order 4 Rule 42 of the National Court Rules.  So the respondent was entitled to move his motion as scheduled on 9 August 2010 which he did (annexure “E” of the respondent’s second affidavit) in the absence of the applicant.

25.	The ruling on the motion was delivered on 24 August 2010 dismissing the entire proceedings with costs of the entire proceedings ordered to be borne by the applicant.  Copies of the relevant order granted on 24 August 2010 are annexed as annexure “B2” of the respondent’s first affidavit and annexure “A1” of the respondent’s second affidavit.

26.	On 10 August 2010, a day after the respondent’s motion was heard, the applicant’s office responded to the respondent’s letter of 6 August 2010 advising that the applicant did not reject his proposal, but due to various issues arising in the case including the respondent’s proposal to enter consent orders to terminate the proceedings, the applicant required more time to assess the situation:  annexure “I” of the applicant’s first affidavit.  
    
27.	Clearly, from the evidence, the applicant was well aware of the respondent’s motion to be heard on 9 August 2010 which was initially made returnable on 2 August 2010.  There is no evidence to suggest that the respondent’s motion was to be heard on 24 August 2010 contrary to the applicant’s assertion in his first affidavit.  That was the date of ruling.   The attitude of the respondent to prosecute his motion on 9 August 2010 was communicated to the applicant by letter on 6 August 2010 and it was incumbent upon the applicant to ensure that he was represented at the hearing if he were not available to appear in person then through a lawyer he said he was engaging to either apply for an adjournment or whatsoever. 
  
28.	I am not satisfied with the reasons given by the applicant as to why the order was allowed to be entered in his absence. This consideration favours the respondent.

If there is any delay in making the application to set aside, provide a reasonable explanation as to the delay
29.	The respondent did not seriously contest this principle.  I therefore find that there was no delay in filing the application to set aside, the applicant having filed the application on 5 October 2010.   This consideration favours the applicant.

Whether the applicant has an arguable case? 
Applicant’s submissions
30.	Relying on his affidavit evidence, the applicant submitted that he has an arguable case arising from a letter sent to him by the respondent dated 8 November 2002 which contained defamatory matters arising from an investigation conducted by the respondent in relation to the operations of Melpa Properties.  It was submitted that the applicant’s action was a cause of action for defamation which was private in nature and not a matter of public interest or inviting public scrutiny to be dealt with in another forum or through another process as asserted by the respondent.     

Respondent’s submissions  

31.	The respondent’s rebuttals are essentially based on matters raised in his Notice of Cross-Motion supported by his affidavit evidence.  It is submitted that the plaintiff does not have an arguable case, but on the converse, the proceedings, in fact, do not disclose any reasonable cause of action or are frivolous or vexatious and are an abuse of the process of the Court for the following reasons.

32.	First, the letter which the applicant claims to contain defamatory matters arose from a special investigation or audit he undertook of the operations or affairs of Melpa Properties, a business arm of the Western Highlands Provincial Government upon being engaged by that Provincial Government pursuant to Sections 211 and 214(3) of the Constitution, Section 113(b) & (8) of the Organic Law on Provincial Governments and Local-level Governments, Section 16 of the Audit Act and Section 7(b) of the Defamation Act and such letter was written to the applicant in that capacity hence protected by law.  He completed his task and delivered his report to relevant State authorities and the Western Highlands Provincial Government.

33.	Second, any challenge to the propriety of his investigation or report should be channelled through appropriate State authorities or by judicial review.  Hence, the applicant lacked standing and sufficient interest.

Reasons for ruling
34.	It seems from the applicant’s affidavit evidence that he has an arguable case.  The matters raised by the respondent however demonstrate that the respondent may have a defence to the applicant’s claim.  This consideration favours the applicant.

Conclusion
35.	As only two considerations have been satisfied by the applicant, the application to set aside the orders of 24 August 2010 must fail.

INDEMINITY COSTS

36.	The respondent by his notice of cross-motion seeks costs on a solicitor/client or indemnity basis.  The applicant submitted that this was a discretionary matter for the Court to determine, but in the present case, the respondent was not entitled on the basis that; he is not a lawyer and has been representing himself in these proceedings since they were commenced; and he has not provided to the Court evidence of unreasonable conduct.

37.	The jurisdiction to award costs on a solicitor/client basis is conferred on the Court by Order 22 Rule 65 of the National Court Rules.  That is where a lawyer’s conduct is the subject of complaint.   However a claim for costs on an indemnity basis where no lawyer is involved may involve slightly different considerations depending on peculiar circumstances of any given case, but the purpose for seeking the relief is the same. Sometimes the terms “solicitor/client basis” or “indemnity basis” are used interchangeably.  That can be discerned from the decision of the Supreme Court in Rex Paki v Motor Vehicles Insurance Limited (2010) PGSC 2; SC1015 where it said:

“An order for costs on an indemnity basis may be made where the conduct of a lawyer or a party to the proceedings is so improper, unreasonable or blameworthy that he should be so punished by such an order. The question is whether the conduct of the appellant in this matter is such that it caused the respondent to incur unnecessary costs.” 

38.	The requirements (although not exhaustive) upon which the discretion may be exercised were set out in Island Helicopter Services Ltd trading as Islands Nationair v Wilson Sagati & Ors (2008) PGNC 49; N3340.   That case reviewed the cases on the subject.

39.	The power to be exercised nevertheless is always discretionary and to be exercised only in a clear case: Island Helicopter Services Ltd trading as Islands Nationair v Wilson Sagati & Ors; Rex Paki v Motor Vehicles Insurance Limited.  

40.	In the present case, the respondent has represented himself and not through a lawyer.  I have had regard to the respondent’s letter to Posmana Kua Aisi lawyers dated 11 October 2010 (annexure “M” of the respondent’s second affidavit).   In my view and in the exercise of my discretion I find that the respondent is not entitled to costs on solicitor/client or indemnity basis for the reason that I accept the applicant’s submission that the respondent has not produced evidence to my satisfaction that the conduct of the applicant or his lawyers are such as to be characterized as being so improper, unreasonable or blameworthy that they should be so punished by such an order.  It is not a clear case.  

ORDER

41.	The formal orders of the Court are:

1.	The applicant’s notice of motion filed on 5 October 2010 is dismissed.
2.	The application to set aside the order of 24 August 2010 and all other relief sought in the applicant’s notice of motion filed on 5 October 2010 are refused.
3.	The applicant shall pay the respondent’s costs of the application on a party/ party basis, to be taxed, if not agreed. 

Ordered accordingly

_______________________________________________________________
Posman Kua Aisi : Lawyers for the Plaintiff				 
Defendant in person